Technology
Thursday, August 29th, 2024 1:51 pm EDT
Key Points
- Slight Dip in Gross Margin and Stock Decline: Nvidia’s stock fell by as much as 3.8% on Thursday due to a slight dip in its fiscal second-quarter gross margin, coupled with the challenge of meeting high investor expectations, despite strong revenue growth.
- Strong Revenue Growth but Slowing Expansion: Nvidia reported a 122% year-on-year revenue increase for the July quarter, marking its fourth consecutive quarter of triple-digit growth. However, the company’s guidance for the fiscal third quarter indicates a slowdown in growth, with an 80% year-on-year increase expected.
- Impact on Semiconductor Industry and Strategic Moves: The decline in Nvidia’s stock also affected other semiconductor firms globally. Nvidia addressed concerns about delays in its next-generation Blackwell AI chip and announced a $50 billion stock buyback program to enhance shareholder value.
Nvidia’s shares fell on Thursday as the company’s fiscal second-quarter results, despite strong revenue, failed to fully meet the soaring expectations of investors. The company reported an impressive 122% year-on-year revenue growth for the July quarter, surpassing $30 billion. This marked Nvidia’s fourth consecutive quarter of triple-digit revenue growth, driven by its dominant position in the artificial intelligence (AI) market. However, as Nvidia continues to rapidly expand, the comparisons to previous years are becoming more challenging. For the upcoming fiscal third quarter, Nvidia issued a market-beating revenue guidance of $32.5 billion, which would represent an 80% year-on-year increase but also a slowdown compared to the July quarter.
The company’s gross margins, expected to be in the “mid-70% range” for the full year, fell slightly below analysts’ expectations of 76.4%. Despite Nvidia’s strong performance, the company’s stock fell by as much as 3.8% at market opening, eventually settling at a 1.7% decline by mid-morning. Analysts noted that given Nvidia’s meteoric rise—its shares have surged over 150% this year and more than 750% since the start of 2023—only a significant beat across all metrics could have propelled the stock higher.
Nvidia’s stock decline also negatively impacted other semiconductor companies globally, with notable drops in the shares of memory maker Samsung and chip manufacturer Taiwan Semiconductor Manufacturing Co. Adding to the cautious sentiment, Nvidia addressed concerns about reported delays in its next-generation Blackwell AI chip, reassuring investors that it expects to ship several billion dollars in Blackwell revenue by the fourth quarter.
In an effort to boost shareholder value, Nvidia announced a substantial $50 billion stock buyback program. Despite these efforts, the slight dip in gross margin and the challenge of sustaining its rapid growth in the face of increasingly tough comparisons led to a pullback in Nvidia’s stock, reflecting the immense pressure on the company to continually outperform in the highly competitive semiconductor industry.
For the full original article on CNBC, please click here: https://www.cnbc.com/2024/08/29/nvidia-nvda-shares-fall-after-earnings-beat-estimates.html
